All You Need to Know About the New Student Loan Forgiveness Plan

Aug 26, 2022 | student loans

On August 24, 2022, President Biden passed an executive order that remains subject to debate. He announced that millions of people would benefit through federal student loan waivers of up to $20,000. However, you need to meet a few criteria to qualify. For instance, high-income earners are left out of the bracket. The exact details of the program are not out yet, but the Department of Education (DOE) has stated that the specifics would be out before the end of the year.

How Much Will Be Forgiven?

The maximum amount that the loan forgiveness plan may waive from your student loan stands at $20,000 – provided you’ve received a Pell Grant when you were in college. If not, the maximum amount is 10,000. You may qualify for this waiver if you’re single and your annual income is below $125,000. If you’re married and file taxes jointly, then your income should be less than $250,000.

What Types of Loans Qualify

Federal loans, which include PLUS loans and parent PLUS loans, are eligible for the student loan forgiveness plan. People with federal loans who’ve not completed their education might also qualify. Federal Family Education Loans (FFELs) do not qualify, as is the case with all private student loans.

Extension on Pause of Repayments

Along with the new student loan forgiveness plan, the administration also announced an extension on the student loan repayment pause. Now, borrowers don’t have to start making repayments toward their student loans until January 2023. The DOE has claimed that this extension will be last, and has asked borrowers to prepare accordingly.

Income-Driven Repayment Plan

A new proposal talks about bringing into play a more affordable income-driven repayment plan for student loans. This aims to bring down the amount borrowers need to pay each month to 5% of their discretionary income from the existing 10%.  This change also brings with it a provision of forgiving loans with original balances of $12,000 or lower after 10 years of payments, down from the existing rule that requires payments for 20 years.

How Else Can One Seek Student Loan Forgiveness?

Even before the announcement of the new student loan forgiveness plan, borrowers had the ability to get their federal loans canceled, forgiven, or discharged.  You might qualify for your loan to be canceled or forgiven if you’re unable to make repayments because of inadequate income. A loan discharge typically comes about upon the closure of a college where a borrower is studying or a borrower suffering permanent disability.

When Might You Need Legal Help?

Most borrowers don’t need legal help to deal with their student loans, all the more so if they’ve taken federal loans.  The one instance in which you might benefit by contacting an attorney to help you with your student loan is if its issuer is taking you to court because of non-payment.

When Might You Need Legal Help?

Most borrowers don’t need legal help to deal with their student loans, all the more so if they’ve taken federal loans.  The one instance in which you might benefit by contacting an attorney to help you with your student loan is if its issuer is taking you to court because of non-payment.

Conclusion

A significant number of borrowers across the U.S. are set to benefit through the recently announced student loan forgiveness plan. If you hold a federal student loan and meet the prescribed income requirements, make sure you keep an eye out for any guidance or instructions that your loan’s servicer will provide in the coming days.